Crypto analyst Arthur Hayes has expressed concerns regarding forthcoming stablecoin IPOs, particularly Circle. He highlights key points investors should consider.
Arthur Hayes' Warning About Circle
Arthur Hayes warns that Circle's stock may be overvalued despite anticipated trading success. He points out that Circle's market capitalization represents 39% of Coinbase's valuation, while Circle pays 50% of its interest income to Coinbase under their revenue-sharing model. Hayes emphasizes that Circle’s single-focus stablecoin business cannot match the scale and diversity of Coinbase’s ecosystem. He also notes that while Circle holds a first-mover advantage in regulated stablecoin markets, the sustainability of current valuations raises concerns.
Circle Copycats Face Distribution Challenges
Hayes predicts a wave of Circle copycats with even more outrageous Price-to-Assets Under Custody ratios. However, these firms are unlikely to achieve Circle's level of revenue generation. New stablecoin issuers will attempt to leverage finance sector credentials to attract investments, but they will encounter closed distribution channels that hinder their success. Hayes identifies three major distribution avenues for stablecoin success: crypto exchanges, Web2 social media, and traditional banks.
Regulatory Framework and Financial Engineering Potential
Hayes highlights that US stablecoin regulation will determine the potential for market manipulation in upcoming IPOs. He warns about the risks associated with a light regulatory touch, which could lead to situations akin to the Terra/Luna collapse. New issuers might create algorithmic stablecoins reliant on unsustainable financial engineering. Hayes emphasizes that despite existing problems, investors should view stablecoin stocks as volatile trading instruments rather than long-term investments.
Arthur Hayes maintains a pessimistic outlook on new stablecoin entrants, noting that access to distribution channels remains the primary barrier regardless of regulatory conditions.
